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Belgian National Bank Governor Gets It: Bailing Out Spain "Makes No Sense"
A week ago we explained quite clearly why instead of encouraging self-defeating, short-termist behavior by promising to save Europe's insolvent countries if and when needed, which does nothing to resolves Europe's problems and make it worse in exchange for a brief respite from bond selling, the ECB should be doing precisely the opposite: encouraging local governments to understand that there is no magic bazooka from the central banks. Specifically we said that "this Catch 22 of confounding cause and event can continue seemingly indefinitely, although in reality it can't. Because fundamentally what the bond market does is keep sovereigns "honest" - just as Schauble said a week ago, Spanish yields at 7% are not the end of the world - instead what they are is a signal to the country to get its spending in control in order to reduce its deficit, and fundamentally get its house in order - yes, that means getting government spending to a sustainable level and firing hundreds of thousands of workers, as well as probably raising taxes even more. It also means pain all around, but the pain is inevitable and will only be worse the longer reality is denied." This logic is so clear that only a lifelong economist, PhD or Goldman apparatchik can not grasp it: sadly that accounts for most of the people "in charge."
Which is why we were delighted to read that at least one person "gets it" - Belgian national bank governor Luc Coene, the same Belgium that is also the clogged heart of the Burtonian bureaucratic labyrinth known as the EU, who told Belgium's two largest newspaper that "buying the bonds of these countries would only serve to weaken the ECB and do nothing to resolve underlying issues of competitiveness. “It makes no sense for the ECB to start financing those countries,” said Mr Coene, “It would only lead to the ECB taking on the whole public debt of Spain and Italy onto its balance sheet." Bingo. And not a moment too soon - we really were starting to pull a Mogatu here.
Telegraph has more:
"That would in turn weaken the ECB and do nothing to resolve the underlying problems."
Mr Coene also said that the central bank's efforts to calm markets last summer with around €135bn of additional debt purchases on the secondary market via its Securities Markets programme took away the pressure on politicians to act.
“We haven’t forgotten what happened in August of last year: We bought Italian bonds and right after that the Italian government reneged on its pledges," he said.
Actually your ex-Goldman Italian colleague over in Frankfurt has forgotten all about.
As for the punchline, which would have long been implemented, if only the total loss of (at least) one year of Goldman Sachs banker bonus was not at risk:
“The conclusion is clear: When you take away the market pressure, you take away the pressure on politicians to act.”
In the meantime, the total abortion that is the market, which no longer can discount anything due to the endless political meddling in its affairs, is starting to lose hope that Europe will be saved when Spain announces it is broke (let that sink in).
Spanish and Italian borrowing costs edged up on Friday, following a week of steady falls on hopes that Spanish PM Mariano Rajoy would make a formal request for EU aid, which would then trigger action from the ECB.
President Mario Draghi initially disappointed markets at his monthly press conference by reiterating that "the ECB cannot replace governments," and that countries would have to request assistance from the European Financial Stability Facility (EFSF) before the ECB could step in.
"Even if we were ready to act now, there would not be the grounds for doing so," he said.
We could say more, and get even angrier, but instead we will leave readers with a clip which, since last year, has captured the essence of Europe better than anything.
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7% yield isn't the end of the world, its that massive move to 7.25% yield thats the back breaker.
Amazing to watch a small change in yield be the kiss of death...
Its about time some one of these people wakes up!
http://ericsprott.blogspot.ca/
I just want to thank Tyler, even though he is a …, for letting me post uncensored on these boards. Not the same in the msm.
but the pain is inevitable and will only be worse the longer reality is denied.
That's what I'm counting on, Worldwide!
Rare Snowfall Stuns Much of South Africa
http://hosted.ap.org/dynamic/stories/A/AF_SOUTH_AFRICA_SNOW?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2012-08-07-17-06-15
While on the subject of things that don't make sense.
Pauly D from reality show Jersey Shore made $11 million last year and advocates investing in gold.
http://www.tmz.com/2012/08/12/pauly-d-jersey-shore-investment-tip-buy-gold/
When Pauly D is more astute than most of the world, something is seriously seriously wrong.
Actually Pauly D and I have formed an alliance and we're also gathered 8 billion others worldwide.
Sorry amigo....it looks like you're screwed.
I've had more intelligent economic conversations with the cashier at Trget than some of mt college professors. I had one professor back in 2009 laugh at me when I expressed concern that Greece was imploding. At least the cashier understands that inflation is higher than what the government claims and we're spending too much money. I'd say that puts her a head of 99% of the people in government.
With a good hair dresser we could turn him into Micky Mouse, a real hero indeed.
The cashier lives in the real world.
An exact quote from one of the commenters on that article:
"Gold is actually one of the poorer investments an individual can make. We learned that early in business school.
Google "why gold is a bad investment" and read the WSJ/Marke****ch article, it explains why pretty well."
LOL...
I wonder how much student loan debt this schmuck has?
I laughed at that one too..
it,s called "la niña" .....
next two years we get "el niño" , now that is when you can really expect alot of snow.
Making fun of ABC might be a start.
Just don't don't abuse it- fucker!
Shut it, dillweed.
Oh come on... I wanna see somebody abuse themself.
first the tunnel of love
then the bazooka of pain
Now now, even a Goldman apparatchik gets it.... the pain being the solution (of sorts) it's just that the Pain Venue Does Not Manufacture Events and Deals from which Goldilocks Profits
From Chaos, Profit
Aw Knucks - every once in awhile you coin an absolute gem:
'From Chaos, Profit' indeed. Good for a Post-it on the trading screen.
Tunnel of Love ?
French Bazooka
That about says it all.
Yes, it's WB7 envy time. Where art thou oh Banzai?
http://www.youtube.com/watch?v=gFxWHyIxxQw&feature=player_embedded
through the ponzi turnstile bitchezz!
tell me about the fucking golf shoes
We had two bags of grass, seventy-five pellets of mescaline, five sheets of high-powered blotter acid, a saltshaker half-full of cocaine, and a whole galaxy of multi-colored uppers, downers, screamers, laughers... Also, a quart of tequila, a quart of rum, a case of beer, a pint of raw ether, and two dozen amyls. Not that we needed all that for the trip, but once you get locked into a serious drug collection, the tendency is to push it as far as you can. The only thing that really worried me was the ether. There is nothing in the world more helpless and irresponsible and depraved than a man in the depths of an ether binge, and I knew we'd get into that rotten stuff pretty soon.
gateway to the extract of pineal via nixon?
Hunter Thompson Bohemian Grove Snuff Film Mark Dice Video Response: The Franklin Cover Up
Sounds like a little pleasure cruise we took one boring summer Saturday from Boca down to Miami 20 years ago when I was in the bond biz....
ssbebeRebozo?
Phlebitis, bitches. You might be surprised at some of the peeps who went to Miami to see Bebe's doctor (10 years before the little episode I mentioned above)
"When the going gets wierd, the wierd turn pro."
The majority of the EU parliament and the ECB, for starters, are tremendous examples.
Where the hell is the nitrous? Really helps with all that other stuff.
http://www.youtube.com/watch?v=_bwHK1xkgJA&feature=related
Hand Of Doom
Now you know the scene, your skin starts turning green
Your eyes no longer seeing life's reality
Push the needle in, face death's sickly grin
Holes are in your skin, caused by deadly pin
Head starts spinning 'round, you fall down to the ground
Feel your body heave, Death's hands starts to weave
It's too late to turn, you won't want to learn
Price of life you cry, now you're gonna die!
Yeah.....about that. Bill Murray channels Dr. Hunter S Thompson.
http://www.youtube.com/watch?v=1-TGRLdE950
They should convert Dexia debt to equity.
Not correct as says in the article above, that the interview was with 'Belgium's two largest newspaper' (sic).
De Tijd and L'Echo are the two business newspapers in Belgium, i.e., the largest papers that are the Belgian versions of the Wall Street Journal ... in Dutch and French, respectively (Belgium is about 60% Dutch-speaking and about 35% French-speaking, we have a small German-speaking region as well in our third official language.)
Other papers here are far more 'popular' and larger.
Luc Coene was speaking to his 'target' audience of business owners and investors ... taking the 'hard line' for his audience.
This is a big game in the EU right now ... talk tough like the Germans ... but everyone knows the ECB will print.
Luc Coene and Herman van Rompuy are probably meeting for cocktails and a laugh soon.
Here is a picture of Luc Coene with an article in English in the current online Belgian news
http://www.deredactie.be/cm/vrtnieuws.english/news/120811_Coene_recessio...
Bingo. If this Belgian dickhead had been so against ECB purchasing PIIGS bonds, the ECB decision of last week would have been "unanimous with TWO reservations" instead of "unanimous with ONE reservation"
It did occur to me what, exactly, was the difference in his statement and the one from Richard Fisher last week; other than he seems the first CB governor in Europe to 'wake up and smell the coffee'? Is there a path to this becoming a more mainstream view?
Thanks for a Belgian perspective. - - - I read this and thought someone in the New World Order didnt get the word to this guy . . . . "The damned thing is Supposed to crash, so we can offer our globalist bankster solution."
Bank guy, and many others like him, is still another reason to love ZH - the news behind the news. Reality can be SUCH a bitch.
This fundamentally ignores the reason why sovereign debt is denominated in government chartered central bank credit.
YAWN!
We need a systemic change to let the people be represented by the republic.
I saw the same video on a previous ZH post. It reminded me of wood shop in the 8th grade.
I wonder what the long term effects of doing that are? Uh.
i've found that sniffing glue mitigates the long-term effects of the lacquer thinner...
.....then say that in Greek, or perhaps Spanish...
By now everyone should know that the name of the game is not to bail these countries out to avoid some sort of collapse but to make the the prospect of default so monstrous in the minds of the leaders and people that they think getting one more bailout is worth relinquishing their sovereignty. Once someone else holds your purse-strings, all you are is a labor pool colony.
As Europe has its member countries, here we have the same thing going on with municipalities and soon whole states declaring bankruptcy, begging Uncle Sam for help. Help will come when the begging reaches the right kind of desperate pitch. Then "help" will come with some nasty tasting conditions.
The bigger the plan, the slower it moves.
This frog's in a slow-cooker set for decades.......
I'll believe it when I see it. Politicians will do anything to stay in power, even if it means giving up the sovereignty of their country to do so. The Spanish "leaders" will sell out Spain in a minute once the real pressure comes on them. They will do whatever it takes to make sure they get a share of whatever wealth the country has left. After Spain Italy will follow suit.
"... they will do whatever it takes ..."
As will the central planners. This whole circus of financial spasms that has been going on for years is exactly what you described -- The Elite bankers and their political puppets moving from one insane manipulation to the next, all with the aim of maintaining and prolonging their grip on power.
That was a great movie
There ya go, lace the debt binky with LSD and the problem goes away...as long as you keep sucking.
Now why didn't I think of that ;-)
Greyerz - We Are Headed Right Into A Global Financial Crash
Here is what Greyerz had to say: “The die is already cast for the world’s current situation. It was cast many years ago and it is irreversible. This is exactly why investors need to take a look at the big picture and protect their wealth. But focusing on the short-term for a moment, markets look poised for a big move over the next few months here.”
"...instead what they are is a signal to the country to get its spending in control in order to reduce its deficit, and fundamentally get its house in order - yes, that means getting government spending to a sustainable level and firing hundreds of thousands of workers, as well as probably raising taxes even more. It also means pain all around, but the pain is inevitable and will only be worse the longer reality is denied."
What good will that shit do when the bankers are on the take? There can be no government spending without the squids tentacles or the politicians paw in it. Spare me the cart before the horse crap!
at least one person "gets it"
What prevented him from getting it a year ago, or two, or three?
Simple greed, power lust or false compassion.
It makes no difference now...they're too busy fortifying their compounds while asking everyone else to be generous and understanding and open theirs up to more depredations.
Same as it ever was.
I love all these power brokers who suddenly "get it" after years and years of destroying it. Like Pilate washing his hands, it didn't wash him free of guilt.
I've taken great pains to not advocate what I'm about to say and don't advocate it now...but throughout history this has been sorted out in a bloody mess.
I think the thing to do after this time...is to leave the guilt for the ultimate judgement to come and not let the guilty use it as leverage on the living.
I think we are on the same page.
We are.
As are several of us
I want revenge!
Convicts are very remorseful at their sentencing and usually find Jesus shortly before their parole hearings.
Just send them to Detroit and call it even- might be the fairest deal for all.
lol...I have no use for a person who asks for absolution as a robber while on their way to commit a rape.
Which should give some idea of my beliefs ;-)
no, but he is credited w/ inventing pilates
here's the:> "good cop" YouTube <:
but Pilatus got it right away. Guilt does not matter as long as someone else pays for it.
Guilt?
Bankers guilt?
Hahahaha...That's actually very funny.
lol...guilt is a very powerful emotion that can be used for all sorts of sheeple herding.
If I were able to make you "feel guilty" for having a higher standard of living than many other places on the planet, why, there are all kinds of possibilities of you giving me more power & wealth.
Just think...for only ten cents a day, you can feed a starving child...the child only gets a penny after administrative costs...but...you feel better don't you?
And you know you're killing the planet by living the way you do, because we've told you you are, the consensus is in. Now, give us the power to tax you more & distribute it to our friends and we'll make that pain in your heart go away. Or do you like committing planetary genocide?
Yes, guilt. The sweet elixir of elites watered down and served up as Kool Aid for the gullible.
A little Sam Kinison...
http://www.youtube.com/watch?v=vN7ehccspao
If Greece, Italy, Spain, Portugal aren't leaving the Euro .... maybe Germany will ?
September 12. Ja oder nein.
The German Referendum is on the cards now. Maybe...yes...perhaps.
The Belgians just need to learn to punch above their weight- if they want to be one of our strongest allies.
http://youtube.googleapis.com/v/erYpXzE9Pxs%26%3E
"Kill the body, and the head will die."
--Hunter S Thompson
Try telling that to Stephen Hawking..........
Stuck the landing.....that's a 10.
Fuck it, watch a Gorillaz video instead.
http://www.youtube.com/watch?v=04mfKJWDSzI
Sorry for the Justin Bieber ad. Just fullscreen the vid.
I think they ....the politicians and Central Bankers will print...they hav to save their jobs...and maybe their lives....but ....and here is the big butt.......this is where the people will start to question the paper money...the TRUST thing....they will start to feel that maybe they need to get out of it as fast as they can...will it be 10% inflation or run up to 10,000% in a year....its all about the trust.....and it not just the people and businesses in those countries...be it the EU or the USA and Japan.....its other countries holding it too...they will want out first...no flag waving there to hold them back...I read a big gold order came thru London on Friday.....maybe its starting.....the paper is turning to metal...
Exactly . . . IMO what the deflationists miss is that as the US dollar declines further in value, those holding them overseas will seek to dump those claims on American assets for somthing real. In addition, in a deflationary environment the costs of debt in real terms increases. The debt level of business, individuals, and (particularly) the government is already unsustainable. How will it be paid in a deflationary environment ? The bastards have to print.
The situation could fall apart very rapidly with a sufficient loss of confidence in the con game continuing.
Once again a more than serious power broker heretofore ensconced firmly within the monied interests, at the very heart of the charade and illusory business demanding the very soul of participants decries the blatantly obvious well before the truth is ready to be shouted from the roof tops, resulting in his being labelled a conspiracy theorist and expelled from the Palace of Financial Self-serving Injustice.
DUfuckingH
check this out:
https://store.usps.com/store/browse/uspsProductDetailMultiSkuDropDown.jsp?categoryNavIds=catBuyStamps&categoryNav=false&navAction=jump&navCount=2&productId=S_688140&categoryId=catBuyStamps
Forever is crossed out.... is this a joke? or someone at Post Office having the balls to tell it like it is?
Someone must have doctored the pic. That isnt on the stamps.
Pretty accurate though.
the ongoing seems to depend on factions
speaking the same language but with opposing
definitions for the words that are used, generally
signifying nothing, the same, ongoing.
yes, it worked well in the
past but the past is not always an indication
of future outcomes, what they may be and for
what it is worth.
this is a wonderful post, so true.
so.
the thing as it strikes me is that the bipolar,
dualistic meme allows cognitive delusion to
trample the singular truth. speaking of keynesian
thought as it is portrayed the dualism of republicrats and democrians allows for the one side
to defend fiscal, accounting book, prudence as
a virtue while ignoring the dependence of money,
liquidity, creation on credit and debt; while
the other party enjoys running up the people's
debt as long as they are personally rewarded
with money checks convertible to either federal
reserve notes or digital representations deposit-able
in an account outside the jurisdiction of the
internal revenue service, or similar,
where they agree, and you must too , or else ...
.
as that is their call and they will settle it,
whatever it is that they deem to be of any
significance or relevance to human life as they
can appreciate, or not so much. so there you go, enjoy !
it must be great to be the source of money
on this planet, is there an app for that?
...
and let us not forget ...
the solution is the problem .
seems like a "terms" problem to me.
deadbeats will always welsh on their loans if given the opportunity.
anyone else out here have deadbeats in their families? Would *you* ever co-sign their loans?
I do and the answer for me is never.
But boy o boy the stories they can gin up. if they spent half the effort into actually working as they do weaving the sackcloth they'd never be in the situation they're in now.
Ditto for all PIIGS.
Amen, Brother....
Testify!
From the Chuch of Bendere Dundat.
In other news, Corzine wins again.
http://www.reuters.com/article/2012/08/10/us-sentinel-appeals-decision-i...
Sentinel ruling may hurt MF Global clients
A federal appeals court on Thursday upheld a ruling that puts Bank of New York Mellon ahead of former customers of Sentinel in the line of those seeking the return of money lost in the 2007 failure of the suburban Chicago-based futures broker.
The appeals court affirmed an earlier district court ruling that the bank had a "secured position" on a $312 million loan it gave to Sentinel, which turned out to have been secured by customer money.
Futures brokers are required to keep customers' funds in dedicated accounts to protect them from being used for anything other than client business.
However, Thursday's ruling suggests that brokerages can use customer funds to pay off other creditors, Sentinel trustee Fred Grede told Reuters.
Worse, Grede said, is that the ruling suggests that a brokerage that allows customer money to be mixed with its own is not necessarily committing fraud.
http://dailycloudt.com/voice/358/us-attorneys-refuse-to-assure-judge-tha...
US Attorneys Refuse to Assure Judge That They Are Not Already Detaining Citizens Under NDAA
All is well citizen, nothing is happening!!
"So they put us through the turnstiles and let us loose inside."
LOL
Us folks from the 80's were cool....we parted our hair down the middle...we were cool...hehe...hehehehe
That is right. If you give in to beggars that think they are choosers and turn out to be extortionists, then nothing will change in these countries. They will be rewarded for bad behaviour and it will be BAU. These countries need a 'spring'. The old oligarghy and the old parties need to disappear. New parties with new people and new ideas need to emerge.
Eur on.
- The EU Commission
Um... How is this not exactly the same as the Fed?
Hooray & Hazaa keep the FIat ponzi rolling and sniff zome ether
The pain in Spain is surely Goldman's gain..
Frankly he is insane ... if Spain loses access to credit and stops being able to backstop the Spanish bank deposit guarantees there will be a bank run, and wherever it starts, it won't stop there ... what flight of fancy is he on to think that Belgian nationals will have faith in their own banking system once they realise what is on the line? Their economy ain't doing that fucking hot.
This is the great untold reason why no country in Europe can be allowed to completely default (it's untold because while the rich have already spread their Euros over banks in the trade surplus countries, if the plebs do it collapse is a certainty).
Until we have an European deposit guarantee can kicking is the only desirable option (I don't really want to sit on a pile of gold in a dystopian wasteland saying "I told you so").
Playing "gotcha" by finding some corporate nitwit admit to something that is as obvious as George Costanza's bald spot is a waste of time.
All of these morons know what's coming and have known for years. This is a game of "let's play poker" amongst these bureaucrats and corporate flunkies. They're drag racing toward a finish line with a massive concrete wall a few feet past the finish line and they don't give a sh*.
Survival of the fitest is pending.
Are there any solvent (key word) entities that want to underwrite that deposit insurance?
I have a hard time believing that anyone keeps more than 1,000 Euros in a Spanish bank overnight. I wouldn't.
Their balance books probably smell worse than a week old mackerel.
It is true that you wouldn't be able to burn gold in the fireplace to stay warm like the Euro.
But cheer up.
The rest of us will be in the soupline right behind you. Misery will be universal.
Very egalitarian.
The ECB is infinitely solvent in Euros ... and as long as the Euro area as a whole has an external current account and trade balance hyperinflation is not on the cards.
The total bank liabilities are not relevant BTW, you only need to save the depositors to avoid the european bankrun ... the bond holders can go fuck themselves (and stock owners are of course completely fucked).
Please explain me how central banks can avoid extending their asset holdings and print our way to hell. With Rosengren publicly stating that the limit to the FED balance sheet is "the size of the Treasury and mortgage markets combined" I don't see why Draghi shouldn't start buying all periphery bonds. And since the size is quite relevant,I think he'll start pretty soon.
Spanish Towns In Hock As Banks Cope With $250B In Bad Loans
The reason bailing out Spain makes sense is the same reason that the ECB is keeping Greece afloat: no one wants to be the one responsible for causing a default and market panic. I addressed this issue in two posts yesterday:
http://dareconomics.wordpress.com/2012/08/11/greece-is-insolvent-ii/
http://dareconomics.wordpress.com/2012/08/11/greece-is-insolvent/
"I crated the piano neck tie !!!!". --- Mugatu
"no you didn't" --- OBUMMER
The thing most people don't get is that we wouldn't have any of these problems in a world without government.
Who cares about bad banks in a 100% free market? They would not be allowed to exist for a very long time anyway. Only in a world were governments are in power, banks can be in power and destroy economies.
The solution then is not more regulation, but less government. This is exactly the reason why the problem can't and won't be solved. Those in power have no incentive to do the right thing.